Why this is important to Wisconsin businesses: These stable and growing markets are eager for U.S. exports.

As a trade war between the U.S. and China takes shape, it is time for U.S. companies to re-strategize and look beyond China as their primary export market.

An alternative market that has a lot of potential is Southeast Asia, which encompasses Singapore, Indonesia, Malaysia, Philippines, Thailand, Vietnam, Cambodia, Myanmar, Laos and Brunei—a diverse group of countries that are at different stages of development, but that all sharing massive growth potential and geographic proximity to China.

Taken as a whole, the Southeast Asia region has a GDP of $2.8 trillion, which would make it the sixth-largest economy worldwide. Furthermore, the region is projected to become the fifth-largest economy in the world, with a projected $4 trillion GDP by 2022. Analysts expect a “mild trade war”—defined as $50 billion worth of U.S. tariffs on Chinese imports—to have a negligible impact on economic growth in Southeast Asia in 2018. Furthermore, Singapore bank OCBC estimates an impact of 0.1 to 0.5 percent on GDP in the event of a full-scale trade war, involving at least $250 billion of customs duties. The impact would be indirect, as Singapore, Malaysia and Thailand export a large volume of intermediate goods to China.

Foreign direct investment (FDI) in Southeast Asia in 2017 reached $136.2 billion, slightly higher than China's $135 billion in FDI for the same period. This is an important quantitative indicator of how investors and multinational companies have turned their focus south of China. Most of the FDI in Southeast Asia went to infrastructure, manufacturing and financing.

According to PwC’s recent report “The Future of ASEAN: Time to Act,” “there are already some 87 million middle-class households in Southeast Asia with incomes exceeding the level at which they can begin to make significant discretionary purchases. Fueled by increased urbanization and subsequent rising consumption levels, this middle class is set to reach to around 116 million households by 2020. By 2020, the size of the consumer spending pie in the region is expected to hit $2 trillion.”

Southeast Asia has a population of more than 630 million, which is larger than the population of North America. After China and India, Southeast Asia has the third-largest labor force in the world.

The World Bank's 2018 Annual Doing Business report presents the key Southeast Asian economies relatively favorably. Southeast Asia is home to Singapore, which has been ranked second in terms of overall ease of doing business (outranking even the U.S.). Malaysia and Thailand made it into the top 30, outranking Japan and other European countries. Vietnam and Indonesia, on the other hand, were ranked slightly higher than mainland China, while the Philippines' ranking is just a couple of notches below that of India.

In general, Southeast Asian markets are stable and have a solid foundation for rapid socioeconomic development. U.S. companies may have concerns that the Indonesian rupiah has fallen about 10 percent since the start of the year. The country also recently raised import taxes on more than 1,000 goods, including product categories ranging from chocolates to cars, as part of an attempt to curb imports and halt further weakening of the national currency. While Indonesia has been among those economies most significantly affected by capital outflows this year, its fundamentals remain strong. Indonesia’s economic growth has been very consistent at 5 percent a year, inflation is subdued, public finances are strong, the banking system is in good health, and the economy continues to have strong long-term growth prospects.

As global trade evolves, Southeast Asia is proactively developing business environments that are conducive to U.S. businesses. It is clear that U.S. suppliers are already turning to Southeast Asia in pursuit of diversifying their market. For instance, Vietnam, which is a key importer of wood from the U.S., has seen an unexpected influx of U.S. wood that was meant for the China market! Going forward, the region has significant growth opportunities for the private sector across several industries, including automotive, financial services, consumer goods, medical devices, fuel refining, telecommunications and transportation.